MGT Notes

Reference: Strategic Management (5e) – Frank T. Rothaermel (Pg 13)

A good strategy ultimately creates value for society. Here we will see how this causality comes into play.

When entities work in their own self interest towards value creation (while acting ethically), they end up making products with costs in check (profitability), while at the same time consumers can purchase those products at a price point they can afford. This is the basis for value creation. Each party captures a part of the value created.

Value creation also lays the foundation for a successful economy. An entity can re-invest its profits generated from value creation and grow, and this growth can lead to more opportunities for employment and more value creation.

There is a synergistic relationship between individual entities, competitive advantage and society at large. Successful firms eventually create value for society.

Strategic failure can prove expensive for a society, one of the reasons being the destruction of shareholder value. In this light, managerial actions can affect the economic well-being of large number of peoples around the globe.